June, 2013

1. Small Business Update June, 2013

2. Small business

3. Promotions

4. Rate adjustment factor (RAF) and bonus program • Your clients will lock in rates for May 1 to September 1 effective dates, and you’ll get a bonus. • Guaranteed RAF based on the number of new subscribers enrolled with Kaiser Permanente • New groups with 1-5 subscribers 1.10 RAF • New groups with 6+ subscribers .90 RAF • Bonus for every new small group plan you sell that has 6 or more Kaiser Permanente subscribers • New groups with 6-9 subscribers $500 • New groups with 10-15 subscribers $750 • New groups with 16+ subscribers $1,000

5. Rate changes

6. July 2013 rate changes • Includes CalChoice, HSA California, and Choice Solution plans

7. July 2013 rate changes • Includes Choice Solution plans

8. New policies and reminders

9. 2013 new group updates • Effective immediately, any new group employer application must be received by the 1st of the month in which it is effective. • July 2013 rates will be available on June 15 to quote online. In the meantime, please send your quote requests to kaiser.sbu.sales@kp.org. • New enrollment material is posted on BrokerNet (brokernet.kp.org) as of May 1, 2013. Please refer to BrokerNet for the most up-to-date materials.

10. What to do when your small group may be “large”? • A small group that has a management carve-out wants to meet employer shared responsibility. What are their options? • Groups with 51 to 100 total employees can add non-covered employees to current small group policy by purchasing insurance directly through Kaiser Permanente, but they are not eligible for SHOP. • Groups with 101 or more employees will transfer to large group.

11. Transferring groups from small to large • Small Business Unit will handle small to large group transfer. • Groups with 51-100 total employees will remain in small group. • Groups with 101 or more total employees will transfer from small to large group.

12. Rating changes under the ACA

13. Small business considerations Tax credit Member level rating Valid waivers Guaranteed availability Multiple plan offering Carrier-direct or SHOP Grandfathered or non-GF 3:1 rating ratio

14. How rating will change in 2014 Today 2014 and beyond • 45 age bands, 3:1 max ratio • Member level rating • 19 rating areas • Based on employee ZIP code • No risk adjustment factors • 7 age bands, no ratio rules • Family tier rating • 7 rate areas • Based on employer ZIP code • Risk adjustment factors (.90-1.10) • Groups with grandfathered plans will continue to be rated in 2014 as we do today. • Groups with nongrandfathered plans will be rated based on the 2014 and beyond methodology. • Groups with grandfathered and nongrandfathered plans will be rated using both methodologies.

15. Why grandfathered status matters • Many factors will impact an employer's rates in 2014. Groups with grandfathered plans will be impacted less than groups with nongrandfathered plans. • Here are some factors that will impact a small employer:

16. Member level rating • Compare and contrast the rate structure for a $30 copay plan at a 1.0 • Current rate structure • Based on the subscriber age and family tier • ACA-compliant rate structure • Based on each family member age

17. Example 1 of member level rating impact • Employee: Joe, age 53, with a spouse and 4 children Family member Joe, age 53 Spouse, age 48 Child, age 18 Child, age 16 Child, age 14 Child, age 12 Rate $628 $503 $196 $196 $196 $0 $1,719 Member level rating family premium: $1,719 Family coverage tier premium: $1,495

18. Example 2 of member level rating impact • Employee: Joe, age 53, with a spouse and 1 child Family member Joe, age 53 Spouse, age 48 Child, age 18 Rate $628 $503 $196 $1,327 Family coverage tier premium: $1,495 Member level rating family premium: $1,327

19. Can your clients maintain grandfathered status? • Kaiser Permanente will support grandfathered plans. • Other insurance carriers may support or eliminate grandfathered plans.

20. Nongrandfathered mapping to ACA metal plans Goals for mapping: • At a group’s 2014 renewal, we will map them to an aligned plan. • We will align as closely as possible based on actuarial value, and then also on product plan design. • Preserve product type (copay, deductible HMO, HSA, HRA).

21. Rating rules • Birthday billing eliminated for grandfathered and nongrandfatheredplans. • Rates will be adjusted based on age at contract renewal. • New hires will be rated based on the age that they were at the beginning of the contract year.

22. 2014 standard individual exchange plans

23. 2014 standard small group exchange plans

24. Benefits of the SHOP vs. a direct carrier SHOP Carrier access Carrier direct Broad plans • Employee choice of carrier with no minimum participation • Consolidated billing and enrollment • Defined benefits platform • Plan comparison tools • Tax credit • Choice of all SHOP plans + extra non-SHOP plans • Group can choose multiple metal tiers • Retain grandfathered plans • No re-enrollment needed • Ongoing relationship

25. How waiting periods will be impacted for small business • ACA limits waiting periods for new hires to a maximum of 90 days. • Some states (like California) have reduced this to a 60-day maximum waiting period. Employers can also have waiting periods of 0 or 30 days. • Waiting period maximums apply to small business regardless of whether they have grandfathered or nongrandfathered plans. • Kaiser Permanente will offer the following waiting period options: • 1st of the month following date of hire • 1st of the month following 30 days from date of hire • 60daysfollowing date of hire (premiums will be prorated) • Existing small groups with waiting periods in excess of 60 days will be mapped to an ACA-compliant waiting period at their renewal in 2014.

26. Kaiser Permanente will support customer early renewals in Q4 2013. Some disadvantages with early renewal Some groups will benefit from rating changes under the ACA. It will delay access to the SHOP, new benefit plans, and enhanced small employer tax credit. Early renewal available for small groups

27. Definition of small employer under the ACA does not include sole proprietorships or S corporations unless they enroll at least one non-spouse, common-law employee, i.e., non-owner employee who receives a W-2 and is listed on a DE9C. CA AB 1083: “For plan years commencing on or after January 1, 2014, the definition of an employer, for purposes of determining whether an employer with one employee shall include sole proprietors, certain owners of ‘S’ corporations, or other individuals, shall be consistent with Section 1304 of ACA.” ACA Section 1304 defines employer by reference to PHS Act 2891, which incorporates by reference ERISA Section 3(5). Federal law does not classify an individual and his or her spouse as employees when the trade or business is wholly owned by the individual or by the individual and his or her spouse. Sole proprietors and S corps: What’s required?

28. Individuals and families

29. Kaiser Permanente will map individuals with nongrandfathered plans to new ACA-compliant plans as of January 2014. Consumers who buy or renew policies in 2013 that are not grandfathered will need to renew as of January 2014 with an ACA-compliant plan. Individuals in 2014

30. Preparing for 2014

31. Kaiser Permanente timeline

32. What we’re doing to prepare for member growth Opening new facilities and maintaining or expanding existing ones Assessing and updating workforce Providing alternatives to traditional office visits Health care reform readiness